Question

Explain the appropriate field work needed to review high-risk business transactions for cash and revenue.

1. What would you need to do in the field to investigate these?

2. Could you convey this information through charts or other supporting documentation?

Answer 1

Appropriate field work needed to review high - risk business transactions for cash and revenue is as discussed below:

1. . Identify and assess inherent risks of material misstatement in the revenue cycle
2. Identify the significant accounts, disclosures, and relevant assertions in the revenue cycle

3. Identify and assess fraud risks of material misstatement in the revenue cycle

4. Identify and assess control risks of material misstatement in the revenue cycle

5. Describe how to use preliminary analytical procedures to identify possible material misstatements for revenue cycle accounts, disclosures, and assertions

6. Decide fitting reactions to distinguished dangers of material error for income cycle records, divulgences, and statements

7. Decide suitable trial of controls and consider the consequences of trial of controls for income cycle records, exposures, and attestations

8. Determine and apply sufficient appropriate substantive audit procedures for testing revenue cycle accounts, disclosures, and assertions

9. Apply the structures for expert basic leadership and moral basic leadership to issues including the review of income cycle records, revelations, and attestations.

1. Investigations to be done for:

Process of: • Receiving a customer’s order • Approving credit for a sale • Determining whether goods are available for shipment • Shipping the goods • Billing the customers • Collecting cash • Recognizing effect of this process on other related accounts

• Huge records incorporate income and records receivable • Evidence is acquired for each monetary articulation statements • Relevance of affirmations shifts with records and customers • More significant declarations: • Have danger of material misquote • require higher-quality review proof

• Requires information about: • Inherent risks at the: • Financial statement level • Account and assertion levels • Fraud risks • Feedback from audit team’s brainstorming session • Strengths and weaknesses in internal control • Results from preliminary analytical procedures

• Timing of income acknowledgment - Important natural hazard identified with income exchanges • Following data is required to review income cycle • Organization's essential business • Earnings process and nature of obligations that extend beyond normal shipment of goods • Impact of unusual terms, and when title passes to customer

• Right of customer to return a product, as well as returns history • Contracts that are combinations of leases and sales • Legitimate treatment of offers exchanges made with plan of action or that have an irregular or unusual measure of profits